UK fraud squad bends over Serco, G4S for 'phantom crims' probe

Electronic taggers' £9bn gov deals now under threat

The UK's Serious Fraud Office (SFO) has launched a criminal investigation into contractors Serco and G4S after an audit allegedly suggested the companies were massively overcharging for the electronic tagging of offenders.

Sources in government toldThe Guardian that the two firms billed Blighty for monitoring at least 18,000 tagged crims – but it's alleged that at least 3,000 of these turned out to be back in prison, out of the country, released from the tagging scheme, or dead. In some cases, it is claimed, billing carried on for years after tags had been removed or shut down.

The two companies were hired to attach electronic cuffs to criminals to monitor their whereabouts following the crooks' release from prison, but the UK Justice Secretary Chris Grayling ordered a review of the scheme in July following reports of problems with the system.

Serco allowed Department of Justice auditors to go over its books and G4S refused. Now the SFO, an independent crime-fighting team capable of initiating criminal proceedings, has taken over and is forcing a full investigation. The two firms have more than £9bn in outsourcing contracts with the UK government and these may now be at risk, as well as possible criminal charges against internal staff and directors.

Serco's CEO Chris Hyman stepped down from the company last month as part of a corporate shake up. "I have always put the interests of Serco first," he said in a statement. "At this time, nothing is more important to me than rebuilding the relationship with our UK government customers."

The outsourcing giant's electronic tagging procedures are already under the microscope following an investigation by the Cambridge computer scientist Ross Anderson in August for a court case involving an offender accused of trying to remove their tag: Anderson described Serco's tagging system as "shambolic" and claimed the tags were prone to register false removal alerts.

Serco is also under investigation in the UK for another government contract to deliver prisoners to and from court appearances. Grayling said at the time that an audit discovered "systemic malpractice up to board level" in billing for prisoners who were never transported.

Both Serco and G4S have now been blocked from tendering for the next round of contracts for monitoring electronic tagging. But the SFO can recommend jail time for directors if it's found that they were aware of problems and did nothing to rectify them. ®